Why we’re seeing mass layoffs in the US but not the UK

published on July 20, 2020

October 2009 was the worst month of the worst year of the Great Recession One out of every ten Americans was out of work It was bad But not as bad as the worst year of the Great Depression, when the unemployment rate was one in four Few Americans alive today have ever seen that many people out of work Until now

"Coronavirus outbreaks at meatpacking plants, forcing many to close" "Ford, General Motors, and Fiat Chrysler, all temporarily closing US plants because of the coronavirus" "Parking lots, bare Retail stores, corporate offices, all closed" By the end of April 2020, 30 million Americans had filed unemployment claims

Economists estimated that the US unemployment rate was about 13% The highest since the Great Depression But in some other countries, like the UK, for instance, it’s a totally different story Factories, restaurants, all that stuff is closed But this?

This isn’t happening In the US, lawmakers have assumed that all those closed factories, shops, and restaurants have one inevitable outcome: mass unemployment But what if that’s wrong? What if millions of people didn’t have to lose their jobs? What if it didn’t have to be this way?

For most of US history, if you were laid off, you didn’t have a lot of options Churches and charities did what they could, but for the most part, you were on your own That changed during the Great Depression With help from the federal government, states began to hold back a share of every worker’s paycheck

That money went into a fund that workers could tap into if they got laid off "Workers in every state in the union are now protected if they are temporarily laid off or lose their jobs" The system worked pretty well, as long as too many people didn’t lose their job all at once But that is definitely not what happened during the coronavirus lockdowns You can think of the economy as a web of connections During normal times, every day, billions of dollars change hands across those connections,

Between different companies and industries Airlines pay oil companies for jet fuel Those oil companies pay computer engineers to make software that helps them find new reserves And those software companies pay ad agencies to make commercials for them Then they pay to put those ads in front of things you like to watch

And a tiny portion of that money helps pay for us to make videos We spend some of that money on, say, plane tickets for reporting trips, and the whole cycle repeats During normal times, these connections are what allow businesses to pay their employees If some connections break, and a business lays off workers, unemployment insurance is there to help them get by,

Until those connections re-form, and businesses are ready to hire again But when the lockdowns started, and businesses closed down, lots of those connections broke away entirely Businesses laid off millions of workers in just a few weeks, faster than at any time in US history In response, Congress has passed several bills,

Aimed at helping states get unemployment benefits to more people, more quickly But even if that helps in the short term, it might not be enough down the road Because once the lockdowns are over, many of those businesses simply won’t be there anymore Even if they lay off employees, businesses still have to pay rent Plus insurance, utilities, and other business costs

But there’s no money coming in Once the lockdown is lifted, and it’s safe to work again, a lot of businesses will be gone And there will be way fewer jobs to come back to Lots of unemployed people will likely stay unemployed Which will draw the economic crisis out even further

But things don’t have to turn out that way Just like the US, most of the UK is on lockdown Many of those connections between businesses have fallen off But instead of waiting for workers to get laid off, the UK is doing something different The way that they are going about it, is saying to companies: “We will pay you to pay your employees"

Workers get paid 80% of their previous salary, and businesses get help covering rent and other costs Denmark and the Netherlands have put similar systems in place In all of these countries, government support has put the economy on pause, to keep it from falling apart later In the US, Congress did set aside a chunk of money for grants and loans to small businesses,

In the hopes that they would keep their workers on payroll But to get the money, business owners had to apply through commercial banks, like Chase and Bank of America That extra step, combined with the onslaught of applications, resulted in massive delays By the time many small businesses got approval, the fund was already empty When the US first set up unemployment insurance during the Great Depression,

That idea didn’t come out of thin air Policymakers studied similar systems in England and Germany, and then adapted them This pandemic transcends national borders The solutions should too

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